Career interruptions and current remuneration

Abstract

Purpose Career interruptions of employees imply important issues for both firms and individuals, including a possibly lower compensation after returning to a job. Different compensation components are explored, as bonus payments frequently complement fixed salaries for many employees, making various channels of lower compensation possible. This paper aims to discuss this issue. Design/methodology/approach This study is based on a yearly salary survey among a rather homogeneous group of professionals and middle managers from the German chemical sector, which contains detailed information on compensation components next to individual and job characteristics. The incidence and duration of past career interruptions act as the most important independent variables. Mincer-type wage regressions are complemented by estimations on wage increases. Findings The results show that career interruptions are more related to lower subsequent bonus payments than they are to fixed salaries. Furthermore, interruptions caused by unemployment are associated with higher interruption pay gaps than those resulting from other reasons such as parental leave. The results even hint for catch-up effects following parental leave with regard to higher wage increases compared to individuals without interruptions. Career interruptions are more prevalent for female managers offering an explanation for a considerable part of gender pay gaps. Wage losses after career interruptions are more pronounced for male employees than they are for females, though. Originality/value This study extents the literature by disentangling the relation of career interruptions and different compensation components, bonus payments next to fixed salaries in particular. The role of interruption type and gender are also taken into account so that the paper deepens the understanding of the role of past career interruptions for employees’ remuneration.